But, you may ask, Does anyone read the editorials?. Well, I did this time, if only to write this post. But that does not mean that editorials are meaningless. In a land where newspaper journalists stay in one major print-and-TV media family for their entire working lives (barring corporate catastrophes, one of which created the perfect marriage between Sankei and Yoshihisa Komori), the editorial writers are merely a group of the senior, lifetime in-house reporters who have passed the first important up-out-out-to-the-boondocks test in their career paths. What this means is that the views expressed in the editorials are mirrored in the reporting of the actual news, since both sides are the manifestations of the singular, unchanging corporate anima, with no WSJ-like divide between the two. Thus, the ideological and policy preferences of any newspaper (and choice of professional baseball teams in the case of Yomiuri) are incessantly drummed into the minds of its faithful subscribers, channeling, honing and amplifying their responses to issues that may not otherwise invoke visceral reactions.

I may be exaggerating a little, and surely speculating a lot. I cannot read the minds of my fellow Japanese, and do not know firsthand their newspaper reading habits beyond those of my immediate family. Moreover, I do not watch much Japanese TV, so I am relatively ignorant of the tone and content of what appear to be the ideologically less constricting TV news programs and the more popular general-purpose wide shows. Still, when all the major dailies from the Asahi on the left to the Sankei on the right agree on an acutely divisive political issue, that is bound to influence the public’s take on the relative merits of the political position that the two sides have chosen. It surely must also, in this instance, help the Prime Minister keep the road-tribe and other dissidents within the coalition in line as far as his proposal to consign the gasoline tax money to the general-purpose funds is concerned.

The DPJ deserves huge credit for making full use of the opposition’s Upper House majority and the public’s support, thereby registering a major political victory and potentially substantial change in the future use of the gasoline tax revenue. Remember, a Prime Minister no less than Junichirō Koizumi earned a big fat incomplete on this one. However, by refusing to take what was offered and continue what could be very public negotiations for the remainder of its demands (elimination of the surcharge rate, and other reforms), it threw away the political benefits of its achievements and instead exposed its actions to accusations of playing politics with the public’s wellbeing. Yet again, the DPJ has managed to display its dismaying knack for adding up to less than the sum of its parts.

Prime Minister Fukuda, to be sure, is not out of the woods. The surcharge is unpopular with the general public and should remain so, yet he has no choice but to have the coalition exercise its Lower House supermajority to pass the surcharge extension as is come April 29. Moreover, there is a widely held sense of waste, if not outright corruption, in the use of the road money, but he will face fierce opposition from powerful vested interests, including within his own party, that seek to maintain the status quo. However, if he manages to make a show of his resolve with regard to the revote while maintaining the doors open to negotiations with the opposition; and, through autumn and beyond, enforce his proposal on the coalition and actuate visible changes in the size, content and execution of the road plan even as the DPJ remains outside the actual reform process, then he should be able to maintain and enhance public support for his administration, even in the face of continued displeasure of the public with regard to expensive automobile fuels.

This will all be idle speculation if the economy takes a visible turn for the worse. Then, even the DPJ’s latest justification for dropping the gasoline taxes － it’s an anti-recession measure － will gain credibility. But that is a chance that Mr. Fukuda will take.

* FYI the Asahi takes the judgmental elements out of the editorial titles when it translates them. It apparently does this to all its editorial translations, not just these two.

Saturday, March 29, 2008

The Daily NK, a very informative website on North Korea, reports on “A Textbook Alternative to the Historical Leftist View”. According to the report, the Textbook Forum of the New Right Party, which published the “Alternative Textbook, South Korean Modern History”, “claims the need for an alternative textbook because current textbooks negatively depict South Korea's 60-year history since liberation from Japanese colonialism. The most significant characteristic of the alternative textbook is that it emphasizes the "legitimacy" of the establishment of the South Korean government in 1948 saying the true meaning of Korea’s Liberation that it bought freedom, human rights, and the market economy, all of which were oppressed under colonial rule.” According to TNK, the alternative textbook offers some corrective on the colonial years as well:

While describing the Japanese colonial government as "a violent and repressive regime which denied the political autonomy of Korea," it held a different perspective from the currently recognized view giving credit to the colonial rulers for initiating industrial development in Korea.”

This evaluation by itself is not particularly remarkable. Even Bruce Cumings, a revisionist from the left in the American sense and notable non-fan of Japan, allows as much. Of course for the Japanese media, the story is mostly about… us, as thisSankei report shows. The hard copy Yomiuri is also carrying a shorter article, with the same focus.

Friday, March 28, 2008

This must be about as crazy as it gets. Do you remember The Terminator? The second climax? When a skeletal Terminator crawls out and grabs Linda Hamilton in the leg? hey who wouldnt but thats not my point...

If the Clintons had any chance of being on the Democratic ticket as Vice President, this should put an end to it. The Democrats simply cannot risk having them on the ticket now.

The LDP road tribe and its fellow travelers are expressing dissatisfaction with Prime Minister Fukuda’s definitive package. I suspect that it’s mostly show; they have their own rafters to play to. Mr. Fukuda’s initial bid keeps the surcharge intact for the time being, and money for public works is officially supposed to continue shrinking anyway. But that doesn’t mean that there won’t be a lot of resistance over the summer, as various interests, vested and non-, line up for the autumn battle over tax reform. Here, Mr. Fukuda will not be without formidable LDP allies, not least the ever-popular ex-Prime Minister Koizumi and his loyal minions (and the ever-present faction head and former Prime Minister himself Yoshirō Mori).

Not so, of course, the tabloids and the non-newspaper general-purpose weeklies. For them, it’s always been trip it if it moves, shove it if it doesn’t. In fact, the tabloids have been having a field day with stories about the imminent demise of the Fukuda administration, and this trope will gain momentum in the coming weeks. Do not be overly scornful of the muckraking horde; they went after Prime Minister Abe like mad, and you know what happened to him. On the other hand, they relentlessly hounded Prime Minister Koizumi as well, with notably less success. For my penny’s worth, barring unforeseen circumstances, it’s up to Mr. Fukuda and his willingness to threaten his coalition colleagues with the dreaded Lower House nuclear option. (Will he or won’t he risk a snap election?) Either way, the battle should heat up in earnest after the summer holidays.

ADD (March 29): I'm not predicting that Mr. Fukuda will actually have to threaten the LDP and the New Kōmeitō with a snap election to keep them in line, but I do believe that he will have to let people know that he is not afraid of using it. Do you remember Toshiki Kaifu? In 1991, as a highly popular, if somewhat ineffectual, Prime Minister, he threatened to dissolve the Lower House when the LDP did not go along with his political reform package, but lost his nerve and resigned instead.

I take this opportunity to note that the two sides have come to their senses as they agreed today to pass an emergency bill that will extend the non-gasoline special tax measures for two months in exchange for a coalition promise that it will not use it as a pretext to pretend that the original government tax bill has been rejected in the Upper House and exercise the supermajority override in the Lower House. At the end of the day, neither side is that stupid.

Get it right, that is. Yesterday (March 27), Prime Minister Fukuda held a press conference that upped the ante on his earlier statement, with a more specific proposal on the gasoline taxes and the road construction budget and calling on the opposition to join the LDP and New Kōmeitō in joint consultations. The Sankei has posted the full text of the briefing here and here. The hardcopy Yomiuri has a convenient outline of the latest proposal, which I will once again translate, appropriately edited, for your convenience:

1. Enactment of the FY2008 revenue bills during this fiscal year (FY2007).2. Thoroughgoing elimination of waste from expenditures related to the Road Development and Maintenance Budget.3. Abolish the road-specific funds system on the occasion of this calendar year’s fundamental amendment of the tax system and turn the revenue over to general-purpose funds beginning in FY2009.4. The tax rates including the temporary surcharge shall be examined, taking into consideration such matters as the international undertaking on global environmental issues and the need to develop and maintain local roads.5. A Mid-term Road Development and Maintenance Plan shall be newly formulated for a five-year term (i.e. shortened from the current ten year plan currently being proposed by the Fukuda administration and the ruling coalition).6. The new development and maintenance plan shall also be reflected in the implementation of the FY2008 budget. With regard to the use of the FY2008 funds, the Fukuda administration will be open to consultations if there is a realistic proposal from the DPJ.7. Establish a consultation group between the ruling and opposition parties and consult and decide the principles for the use of the gasoline tax revenue as general-purpose funds, the Road Development and Maintenance Plan, and other matters.

On a related matter, this Yomiuri reports says that government sources have indicated that any extra taxes collected as the result of the temporary elimination of time-limited tax benefits on April 1 will be refunded. As I indicated before in my mock coalition announcement, this does not require any additional legislation, but the Yomiuri leak is an indication that the government is preparing for a supermajority override. The report says that this will be part of a Prime Minister’ s announcement on the overall issue at the end of this fiscal year, meaning presumably March 31, i.e. next Monday.

So now what? To answer that question, we must first take a look at the broader political picture.

The major political setbacks to the Fukuda administration have been the following:

1) The revelation that it could not keep the Upper House election campaign promise (made by Prime Minister Abe to be sure) to identify all the holders of the 50 million misplaced public pension accounts.2) Its failure to come to terms with the type-C hepatitis patients who contracted the disease from blood transfusions and fibrin sealants.3) The JMSDF Aegis destroyer Atago’s collision with a fishing vessel and the government’s faulty response.

Yet it is instructive that Yōichi Masuzoe, the outspoken Health, Welfare and Labor Minister on the watch for both 1) and 2), enjoys by far the highest approval rate (beating out even the highly popular “No one/no answer”by a healthy margin), and that Defense Minister Shigeru Ishiba, the defense otaku on the watch for 3), comes next, though he did lose a lot of goodwill as the result of the accident and its aftermath. What these two men have in common is the appearance of a sincere desire to get things done in the public interest and the ability to project it to the general public. They have a touch of that inimitable political skill that Junichirō Koizumi had in droves. In contrast, Mr. Fukuda has appeared indecisive and ineffectual, and his political style, once seen as soothing and reassuring, does nothing to dispel that impression.

However, Mr. Fukuda, or perhaps more appropriately the ruling coalition, has been saved by what appears to be a creeping public disillusionment with the DPJ’s highly and visibly politicized approach to policy issues. This had become evident with the continuing standoff over the appointment of a BOJ Governor*. The Fukuda administration may be falling in the public polls, but support for the LDP seems to have stabilized; the DPJ, if anything, is doing worse than the LDP. On this note, it is now time to go back and address the subject of Mr. Fukuda’s announcement.

Public opinion polls show that two-thirds of the Japanese voters consistently want the surcharge to be dropped, yet the DPJ has not been able to capitalize on it politically. A similar majority of voters wants the two sides to come to an accommodation, and is clearly not buying the DPJ’s hard-line approach. Mr. Fukuda has finally come out with a substantive proposal that promises to take some money away from the road tribe (though the ultimate outcome will not be clear until we see a new road plan and the actual allocation of the funds). There appears to be substantial internal opposition from the road tribe, but this will only serve to enhance his reputation, provided he can actually deliver credible reform. In any case, he has acted, and given the impression of acting decisively. This is definitely a plus for Mr. Fukuda.

So what will the future bring? First of all, I do not believe that April will be the kindest month for the DPJ. The public support for a compromise on the surcharge and the road construction earmark as well as the DPJ’s own languishing support numbers show that its shifting explanations for its stand (now claiming that dropping the surcharge is an antirecessionary measure, a plausible explanation for a temporary, say, one-year lapse) is taking its toll and deepening the impression that the DPJ is playing politics. Whatever confusion arises, which I expect to be relatively minor and therefore easily weathered, is likely to be attributed more to the DPJ than the ruling coalition. Yet the DPJ is locked into an absolute opposition to the surcharge and the road construction earmark, making it difficult to take credit for any concessions that the Fukuda administration has made or will make, or to even participate in any consultations or negotiations. The time has come to settle accounts, yet the DPJ will refuse to lay down its cards. I think that this will reflect negatively, if anything (I think that the DPJ is down, or nearly so, to its core support), on its poll figures.

The next point of tension will come in autumn, when the time comes to work on tax reform, including the gasoline tax surcharge. Prime Minister Fukuda in his announcement explicitly linked the gasoline tax rate to broader issues like global warming and difficult government finances, as well as the continued need to finance road construction and maintenance. He also raised many uses for the gasoline tax revenue in the context of abolishing the earmark. All this appears to indicate that Mr. Fukuda’s default position is to maintain the surcharge.

It is my belief that the DPJ will be unable to engage in a dialogue at that point. Once the gasoline taxes are disconnected from the road budget and the multiyear development and maintenance plan, there is no way to determine an appropriate gasoline tax rate outside of the context of the overall tax profile. But the DPJ claims that all its campaign and post-campaign promises from funding a basic public pension system solely with government revenues to dropping local government co-payments for national road construction works can be funded without raising taxes while improving the public debt position. There is no way that this position can be incorporated into a meaningful dialogue with the ruling coalition. Thus, I believe that the DPJ will stay out of the tent and hope that the Fukuda administration’s default position on the surcharge plus an early (FY2010, or even 2009?) consumption tax hike to fund the pension system will discredit the ruling coalition in the eyes of the public.

Which way will the public turn? It’s hard to guess because I believe that much will depend on how forthrightly and forcefully the Fukuda administration is able to push its case. The polls say that the majority of the voters want the surcharge to end, yet it was never an issue during the last ten years of its existence at current levels. In other words, it is an issue that only presents itself as the surcharge is set to expire, but it is being exacerbated because of the waste and corruption surrounding the expenditures. On the larger issue of the consumption tax rate, the public in the past has shown itself to be more or less reconciled to an eventual hike to narrow public financing gaps, but the distrust in government has forced the ruling coalition to take the issue off the table for the last couple of years.

So there’s a credibility issue that the Fukuda administration must address in its battle against vested interests, which in turn will be played out against the background of opinion polls, media voices, and the Greek chorus of the DPJ. But if push comes to shove with the road tribe in his attempt to carve out a significant chunk of that road money for the general budget, will he be willing to do what Mr. Koizumi did, and threaten to kick dissenters out, to call a snap election if necessary? The DPJ is sitting in the opposite corner on this one, crying for more, instead of less as in the case of Mr. Koizumi’s Post Office privatization, but the internal dynamics are the same. It is not in the nature of Mr. Fukuda to seek that kind of confrontation, but he will have no choice but to wield the Prime Minister’s nuclear option if he becomes trapped in the middle ground between vested interests and the opposition without the votes to force a supermajority override around this time, in 2009 March.

* The DPJ appears to have learned its lesson on this one and quietly allowed Satoshi Tani to be reappointed as Governor of the National Personnel Agency. The DPJ had opposed his initial appointment in 2004.

There’s no need to elaborate on the first one unless you’re reading this blog for the first time (in which case please search my blog with the keyword “taxes”, since half of what I’ve been writing recently must have had something to do with this). The only thing I have to add at this point? Support for the LDP-New Kōmeitō coalition appears to be down to its core while this story has been around for months, so this decision should have little effect on it either way for the time being. The same thing can be said for the equally unpopular DPJ, which hasn’t been able to capitalize on the Fukuda administration’s multiple mishaps as well as the LDP’s structural flaws during his regime, this issue being no exception.

The second headline may not be the top item elsewhere in Japan, but it’s an every-other-day headline here in Tokyo these couple of weeks. I touched on it here, but briefly: The responsibility for the failure of Shin-Ginkō Tokyo lies squarely at the feet of Governor Ishihara, who created the ill-conceived, ill-timed, and poorly-managed bank with 100 billion in Tokyo government money (and 11 billion yen from the private sector, including IT companies that apparently won contracts to set up the bank’s expensive and faulty computer system) against the opposition of the entire banking industry. The entire national media opposes the injection of additional funds, and 73% of the Tokyo public opposes it according to a Yomiuri poll. However, yesterday (26 March) the New Kōmeitō, which had been dithering, reluctantly went along with the LDP and voted in the Tokyo Assembly Budget Committee to inject 40 billion yen, which according to experts may balloon to 100 billion when the bank writes off all the bad debts, which could be as early as fiscal year 2008, when the bank receives the 40 billion. The bill is expected to pass the full Assembly on 28 March, a Friday.

Basically, Mr. Ishihara is placing a 40 billion yen bet that the bank will a) not have to write off all its current equity and b) be able to cover the opportunity costs of the 40 billion; many experts as well as the media doubt that and believe that the Tokyo government should cut losses. The silver lining is that this 140 billion yen (and counting) boondoggle will cut off for good the baseless talk that pops up from time to time in the foreign media about Mr. Ishihara having a meaningful role in a realignment of the Japanese political parties (which in turn I am highly skeptical about; but that’s another story).

Yet 51.1% of Tokyo voters according to that same Yomiuri poll still support Governor Ishihara. Factor former Prime Minister Koizumi’s enduring popularity, and there’s a lesson here for Japanese Prime Ministers and their wannabies.

Want to know more about Shin-Ginkō Tokyo and Governor Ishihara’s grudge match with the banking industry? Be my guest:

Governor Ishihara has a history of run-ins with the banking industry, which he accused of cutting back on its lending to small businesses during the banking crisis years. He also tried to tax them when the banks headquartered in Tokyo were not paying any local (or national) income taxes because of huge loss carryovers. This attempt to get money out of the banks also displeased the national authorities because they had injected trillions in national public funds to keep the banking industry afloat (which in turn was benefiting the Tokyo economy).

In any case, Mr. Ishihara launched Bank Ishihara － as the governor’s critics are fond of calling it － on 2005 April 1 to lend to creditworthy small businesses (as well as venture businesses) that he claimed were getting shafted by existing banks. However, the banking crisis had passed by then and the private sector banks were now making the risky but lucrative small business sector a top priority in their own businesses. Besides, the public sector already had an extensive loan guarantee and insurance system to help small businesses. Moreover, because of the enormous overhead, Bank Ishihara was under great pressure to ramp up its lending accounts. This led to shoddy lending practices there. It is no wonder, then, that the bank has been losing money hand over fist. To top all this, roughly half of the bank’s 200 billion-plus loans outstanding (against initial equity of 100 billion-plus!) has gone to big business. This may be prudent management, but surely not what Mr. Ishihara had in mind when he put the Tokyo Prefectural government in competition with the private banks and the public small business assistance network.

Fortunately for the financial sector, all this has meant that the bank is isolated metaphorically and physically from the mainstream banking sector. Mr. Ishihara stated after the Tokyo Assembly passed the 40 billion yen injection bill: I am grateful that the trigger won’t be pulled on a financial panic out of Tokyo. Actually, a Bank Ishihara failure would be the tree that falls in the forest that nobody hears.

Tuesday, March 25, 2008

One of the more amusing headlines after the Upper House rejected Kōji Tanami, a former Administrative Vice Finance Minister and current head of the Japan Bank for International Cooperation (JBIC), as BOJ Governor Toshihiko Fukui’s successor came with this 20 March Sankei editorial:

Vacancy in BOJ Governor’s Seat…Japan Will Disintegrate…Stop the Spreading of Political Confusion

日銀総裁空席 日本がつぶれてしまう 政治混乱の拡大食い止めよ

Nearly a week has gone by, and “political confusion” is indeed “spreading”. But that has nothing to do with the BOJ and everything to do with the gasoline taxes, and Japan does not look like it’s sinking into the Pacific any time soon. The market took little, if any, notice of the event, and the media itself has moved on. As Ross has reminded me, the BOJ and its bureaucracy (you didn’t think that Mr. Fukui sat around closeted with a couple of central bankers and a bunch of non-specialists to hash out the next move on the official discount rate, did you?) are institutionally capable of weathering any number of mini-crises. In fact, if Masaaki Shirakawa, the Governor Pro Tem and a BOJ graduate himself, weathers a couple of such events － say, for one, just to give him a little practice, the Tokyo New Kōmeitō comes to its senses and vetoes the Shin-Ginkō Tokyo rescue and causes a bank run on it － and earns market confidence, it will become hard for MOF and its LDP sympathizers to deny him full title to the job.

That would be a salutary turn of events, something for which the DPJ should be able to take credit for. Unfortunately, because it played the issue for political effect only, it brought substantial negatives on itself public communications-wise.

Speaking of Shin-Ginkō Tokyo, or “Bank Ishihara”, as Governor Ishihara’s opponents love to call it, the 40 billion yen rescue package put forward by Governor Ishihara (it is widely assumed that it is likely to balloon to 100 billion before the year is out) and the pending vote on it in the Tokyo Prefectural Assembly are receiving little if any attention in the foreign media. In fact, the entire Bank Ishihara controversy is being ignored, while it’s front-page news every other day in Japan. That is strange, given their long-time fascination with the controversial but charismatic national － and nationalist － political figure, the possibility of a Japanese bank failure, however small, in the context of a global financial uncertainties triggered by the subprime crisis, and the opportunity to link the two. Perhaps, like me, they find the technicalities too daunting to write or talk it up on just hearsay and the work of their research staffs

In any case, the foreign media (and yours truly) are not the only ones avoiding the issue. Everyone who had a role in bringing the poorly timed and ill-conceived bank to the dinner table for small businesses in distress is ducking for cover, from Governor Ishihara to then-Kaidanren head Hiroshi Okuda.

(correction: I found a couple of errors that I have corrected, most importantly the omission of Health, Welfare and Labor Minister Masuzoe, who incidentally has a whopping 51.4% positive evaluation from responders as a Fukuda Cabinet member. Defense Minister Ishiba is a distant third at 13.5%. “No one/no answer” places second with a respectable 35.8%.)

Nobody leads Mr. Asō by a comfortable margin. You also have the feeling that if it were up to the public, Mr. Koizumi could walk in any time and claim the prize for own. As for the DPJ, Mr. Ozawa fares better than Mr. Fukuda, but overall, he is only part of the problem in a DPJ leadership that cannot capitalize on the continuing errors and omissions under the Fukuda administration and the public’s growing dissatisfaction. The finger-in-the-wind decision-making under reclusive Mr. Ozawa is taking its toll. The only thing that can save the DPJ is a… an Asahi poll?

* 1,786 people out of 3,000 randomly chosen eligible voters responded to the poll by face-to-face interview. A brief online report can be found here.

Sunday, March 23, 2008

Just imagine the fun that Jon Stewart and Stephen Colbert are going to have with this one, though I won’t be surprised to see Fox News go easy on her.

Personally, I don’t hold this against Hillary Clinton, in the sense that I don’t think that she’s consciously fabulating. There are too many witnesses, too many records of a First Lady’s visit to make sense in lying about it. She has her stupid moments, lapses in judgment, but this is too much. What happened then?

Mrs. Clinton must be unaccustomed to the kind of imminent physical danger in war zones, and she must have had at least some apprehensions about flying in to recently war-torn Bosnia (though not so much that she wouldn’t bring her daughter along, for Christ’s sake). From the landing to her exit from the airport, subjectively, it could have been the greatest moment of anticipated physical danger in her life, whatever the actual situation turned out to be.

It is my personal experience that I misremember some of the most vivid moments of my life. Reality as I remember it is too often colored and distorted by the emotions, the joys and fears of the moment, the regrets and the triumphs. I imagine that this happens to the far more disciplined Mrs. Clinton as well. (Barack Obama has been caught off base in his first book; Roger Cohen, drawing on his own experience, made a similar case for him in a WaPo column.) It’s been twelve years since the event for her. Still., the damage is done; she has a reputation, and it’s working against her here. It’s too bad that nobody, including her daughter, bothered to stop her from embarrassing herself after the first slipup.

I’m not sure why Sankei is saying here that the LDP has to pass the DPJ tax bill in the Lower House by 31 March if it comes out of the Upper House “to avoid a “Grand Panic” where all the temporary tax rates including customs tariffs become void”. It has the mechanics right, but the Lower House also passed a stand-alone bill － as is the custom － to amend the Customs Tariffs Act curtsey of the Fukuda Cabinet and sent it to the Upper House. If the DPJ refuses to vote on that bill in the Upper House, it will rightfully be accused of playing politics with customs tariffs to get its way on the unrelated gasoline taxes.

More pertinent to the Sankei claims, if the DPJ has its way and the LDP stands firm, the biggest impact will fall on beef, where the tariff will revert from 38.5% to 50% on April imports. Not insignificant, but will it make you feel better if you remember that the yen was hovering upwards of 120 to the dollar about this time last year, which more than cancels out the effects of a higher tariff rate? The more important Australian Dollar (where beef is concerned) has fallen from around 100 to 90 yen during the same period, just about canceling out the effects. Tariffs and exchange rates are not the only things that affect beef prices (feed grain, China, etc.), but the reports of the sky falling down have been greatly exaggerated.

Yes, a standoff will have some real-world effects. Still, it won’t be anything near the end of the world. Politically, it’s mainly a blame game, and my guess is that the LDP does not think that the DPJ is playing it very well. It must be looking at the polls and thinking, as badly as the Fukuda administration is doing, the DPJ is looking even worse, and we think we know why.

Now if I’m right and Sankei is wrong, what’s going on? Are the people there stupid? Or are they playing their own political games?

Saturday, March 22, 2008

The US liberal media and blogosphere are giving Chris Wallace well-deserved credit for criticizing his Fox News colleagues for their ceaseless barrage of invective against Barack Obama for his relationship with Reverend Wright and his church. Here’s an example, complete with the YouTube link.

Mr. Wallace is known to liberals, who otherwise tend not to watch Fox News, for his run-in with President Clinton in this interview. The good part (or bad part, depending on your political point of view). Personally, I think that Mr. Wallace comes out looking better. Mr. Clinton makes a good argument for himself on what he did to go after Osama bin Laden, but he basically dismisses the 9-11 Report and says, read Richard Clark’s book and believe everything in it. Mr. Clinton’s dark, obsessive side comes out, the side that came out in the South Carolina primary.

More importantly, does a substantial part of the US public really get the news solely from Fox News and conservative radio talk shows? And how different are they from people who rely on The Daily Show and The Colbert Report and Keith Olberman?

Let’s hope for the sake of Jim Cramer’s wallet (but not his soul) that he didn’t follow his own advice. And now here’s Mr. Cramer doing a post mortem and basically telling his fans to buy, buy, buy, a most welcome message to the professional supporters of the cable channels and publications featuring investment news.

Now much political analysis also belongs to the same category of loud, louder, and loudest commentary. That’s a useful reminder to this blog, which in its own humble way tries to write with as much clarity as possible and still get it right, hopefully more often than not.

Yesterday, a Friday, Sadakazu Tanigaki and Tetsuo Saitō, the Policy Research Council Chairmen of the LDP and New Kōmeitō respectively, dutifully consulted their peers and presented the results to the opposition parties as a six-item proposal. There are three major changes, which I show in the following translations, from Prime Minister Fukuda's original instructions. The emphasis and italics are mine, to highlight the differences:

3) The road provisioning mid-term plan shall be reviewed, including the period of the plan, on the basis of new data on demand, etc. In the event, necessary provisioning of roads shall be steadily implemented.

5) With regard to items 2 through 4, an organization for consultation between the government parties and opposition parties shall be established expediently and consultations shall be started.

6) With regard to matters on which agreement is achieved under such consultations, they shall be implemented in the budgets for fiscal year 2009 and beyond.

Item 5 merely changes the procedural point as Mr. Fukuda’s instructions to the two party chairmen are transcribed as a proposal to the opposition parties. Item 6 merely confirms my observation that any amendments will come at least a couple of years into the future. It does spell out explicitly the practical implications of item 2, which still reads, “The road-specific fiscal funds shall be reviewed with a view to its inclusion in the general-purpose fiscal funds on the occasion of the fundamental reform of the tax system.” This is, I repeat, a killer for the DPJ.

The most significant change by far is the addition in item 3. The words do not on their own have any operative meaning, but were added, according to a Yomiuri report, to alleviate the New Kōmeitō’s worries. If true, the New Kōmeitō is out-LDPing the LDP on this one. The opposition will surely highlight it as the expression of a business-as-usual mentality.

The DPJ continues to say that it won’t agree to talk unless the LDP and New Kōmeitō in effect accept its proposal in its entirety, which is a kind of procedural oxymoron. To avoid the confusion over retail pricing and purchases around the expiration of the gasoline tax surcharge, it has introduced legislation in the Upper House (echoing the two-month extension that the coalition gave up under the Chairmen’s consent decree) to refund to wholesalers the surcharges for March*.

Everything indicates that the DPJ will stand pat come 31 March, and nothing the media says is going to change this situation. I am convinced that the coalition, including the Prime Minister, knows that as well. Also, note that the coalition itself cannot alter the tax bills during this Diet session without the DPJ’s consent**. Thus, the coalition is going to be stuck with the taxes and the road construction budget as-is until the next Diet session at the earliest, and most likely until the 2009 ordinary session, which traditionally convenes in January***.

One of the consequences of this outcome of this Diet session as I foresee it is that the coalition will have to come up with a credible program on the gasoline taxes and their disposal in its entirety in place, including some down payments, before it can go to the electorate. This means that the Lower House general election will come later rather than sooner. In fact, the current Lower House members now have a good chance of serving out their full four-year terms, until 2009 September.

That, of course, does not mean that Prime Minister Fukuda necessarily will be able to do so as well.

* This could create some accounting problems on its own where the gasoline has already been sold to the retailer. I’d have to read the actual bill to be sure, but I’d really have to be at a loss of things to do for that, since the coalition will surely not let the bill pass when it comes to the Lower House.

** The coalition can, of course, alter the bill in the Upper House and send it back for a simple majority revote in the Lower House if it can get the Communists and Socialists on board. But it's easier to, say, make Australians stop killing kangaroos.

*** As a matter of pure speculation, the Prime Minister can summon a long and early ordinary session that covers the usual “extraordinary” session that is now commonly summoned in the autumn. If that happens, it will surely go down in history as the Long Diet.

Thursday, March 20, 2008

Note that in item 2 of his proposal that I wrote about here, Prime Minister Fukuda proposes to convert the gasoline tax into general-purpose revenue as part of “the fundamental reform of the tax system”. This is a killer for the DPJ. It’s bad enough for them that it puts the matter a couple of fiscal years into the future at the very earliest; it will also expose the weakness of its position on funding for the public pension system without a tax hike. Its current piecemeal approach makes it easier for it to avoid facing the cumulative revenue effects of its “out-promise the LDP and deal with the consequences when we win” strategy that they’ve adopted under Ichirō Ozawa. An overall review will make it difficult for the media not to notice.

In the meantime, Sankei continued pushing its interpretation － the DPJ has the ruling coalition and the Fukuda administration in particular in a panic － with this story. They run under different bylines, and I don’t see any of the other major dailies going nearly this far, so this must be a uniquely Sankei narrative. I see the immediate political situation quite differently, which has been the point of my earlier posts, here and here. Sankei, of course, is highly critical of any deviations from the dynamics that the Koizumi reform had put into place (and also supportive of Prime Minister Koizumi’s romps on the hallowed grounds of the Yasukuni Shrine), so it’s actually more aligned with the opposition on this. I think that its apprehensions － well-founded, by the way － are clouding its judgment of the overall situation.

For the record, here’s a translation of a more complete version of Mr. Fukuda’s proposal:

1) Enactment of the fiscal year 2008 revenue bills within this [2007] fiscal year.2) The road-specific fiscal funds shall be reviewed with a view to its inclusion in the general-purpose fiscal funds on the occasion of the fundamental reform of the tax system. The fiscal funds of the local governments shall be protected on that occasion.3) The road provisioning mid-term plan shall be reviewed, including the period of the plan, on the basis of new data on demand, etc.4) Transparency and discipline with regard to the road budget shall be [promoted], including expenditures to public interest legal entities.5) I request that [you] consult with the opposition parties after coordinating within the government parties on the basis of the above points.

The hardcopy Yomiuri article also carries the following estimate, surely courtesy of the Fukuda administration, in 100 million yen units, of the road-specific fiscal funds for FY 2008:

Wednesday, March 19, 2008

As expected, the DPJ said no to Kōji Tanami, the latest sacrificial lamb on the BOJ Governorship altar. There are two ways to interpret this: Prime Minister Fukuda is nuts; or, there’s a game plan. Since the first one leads nowhere unless you’re a diehard DPJ fan or an LDP member seeking to depose Mr. Fukuda, I, as an Independent, have no option but to hypothesize that there is a game plan. And if there is one, then this looks as good as any, no*?

Well, today, even while the LDP-New Kōmeitō were pushing Mr. Tanami’s doomed candidacy, the coalition got together and worked all day to hammer out a gasoline tax/road construction budget game plan. It culminated in Prime Minister Fukuda’s five-point plan “Our Thinking on the Road-Specific Fiscal Revenues:**

1) Pass tax bills during this fiscal year [before 1 April];2) reexamine the road-specific revenue with a view to turning it into general-purpose revenue as part of the fundamental reform of the tax system;3) Re-examine the mid-term road provisioning plan for including its [ten-year] term;4) [Promote] transparency and discipline with regard to the road budget, including expenditures to public interest legal entities; and5) Consult with the opposition parties after coordinating within the ruling [coalition].

If anything, they went beyond my “message”. But then, you can’t win ‘em all. Besides, something may have been lost in translation. But I digress. Luckily for the coalition, Naoto Kan, one of Ichirō Ozawa’s two deputies and once and (hoping to be) future king, rejected it even before it had been announced*.

As for Mr. Tanami, you need not shed a tear for him. He remains ensconced as the head of the Bank of International Cooperation (for which I have a special place in my heart, having come up with its English name when OECF and the Ex-Im Bank merged to form JBIC), after gaining some political brownie points for his momentary humiliation.

Speaking of “advice”, I have been reminded that “the [Japanese government] has followed [DMr. Dujarric’s] advice and recognized Kosovo.***” Well, is it my fault the LDP prefers to listen to American Japan handlers and ignore the concerns of Japanese voters like me?

FYI, Serbia recalled its ambassador to Japan in protest.

* Mr. Kan also said, “We were 99% willing to accept just about anybody.” That’s one of the faults of the DPJ leadership. They’re too honest to be really effective politicians.

Tuesday, March 18, 2008

This morning, the LDP tossed two names in the ring, one of them being Kōji Tanami, head of JBIC and the Fukuda administration’s latest candidate for BOJ Governor. Problem? Mr. Tanami, like the unfortunate Mr. Mutō, is also a former MOF Administrative Vice Minister. The DPJ leadership is understandably throwing a collective fit. I, too, for a moment wonder, Is Mr. Fukuda nuts? Then I remember that everything exists for a reason, and go back to my default mode: It is part of the setup. They are tossing up one unacceptable candidate after another because they know that it makes the other side look bad…

The problem for the LDP is that it also makes Prime Minister Fukuda look helple…

Aha!

… but who then look crappy themselves…

Do you know who I think is behind it all? Mr. None of the Above, that’s who.

Just in case anyone had been waiting, today, Japan recognized the Republic of Kosovo. Here is the announcement by the Minister of Foreign Affairs. According to the Mainichi, Japan is the 26th state to do so.

When all the main Japanese dailies reported that the LDP had proposed that Toshihiko Fukui, the current BOJ Governor, and Mutō Toshirō, one of the two Deputy Governors and favorite candidate of the coalition, business and mainstream media, stay on for another term, I’m sure that everyone had the same thought, namely, WTFBBQ? Of course the DPJ said no way, leading to near identical headlines on all the reports.

This particular turn of events (if true － Chief Cabinet Secretary Nobutaka Machimura denied that such a proposal had been made) reflected badly on Prime Minister Fukuda, and rightly so. Now all things unconsidered, that would be a great choice during these troubled times. (You also wish that there had been provisions in the BOJ Act in the first place for a Governor or Deputies continuing to perform their duties during a (now near-inevitable) interregnum, like most institutional by-laws.) But Mr. Fukuda would have been nuts to have expected that the DPJ would say yes. He’s looking wussy lately, but a moron he is not. So what’s going on?

My guess is, the Fukuda administration is stalling while MOF and its internationalist allies lobby other major ADB shareholders (US and who else?) to make sure that Japan can continue to impose a Japanese President on the ADB if Haruhiko Kuroda vacates the post to be appointed BOJ Governor. I think that, in that case, they want to replace Haruhiko Kuroda with the recently retired (from MOF) Hiroshi Watanabe.

The latest Yomiuri polls (15-16 March) came out, and nobody comes out smelling roses. Now yesterday, I wrote a post showing you how the LDP could do a little ju-jitsu on the DPJ. Just to be fair (and I did vote for both parties over the last two elections), I’m going to show you how the DPJ can spin the Yomiuri numbers.

“True, we the DPJ did not do too well in the latest Yomiuri polls. In fact, 59.4% of the responders do not appreciate our treatment of the BOJ Governor appointment, while only 25.1% do. However, the LDP’s gasoline tax surcharge is doing even worse, with 64.2% favoring its elimination. And the Fukuda administration did even worse with its treatment of the Atago-fishing boat collision, with a 74.1% disapproval approval rate.

“We are aware that in the choice for most favored party, we dropped 2.4 percentage points. However, the Fukuda administration lost 4.8 percentage points, or twice as much support.”

There are, of course, other ways of arguing the numbers. For example, the responders continue to favor an agreement between the two sides on the gasoline taxes by an overwhelming margin of 63.3% to 28.5%. On a broader point, they continue to support the LDP (33.1%) over the DPJ (17.6%) nearly two to one. But the top spot is firmly in the hands of: None of the Above － it registered a bigger gain than the LDP, the Communists, the Socialists and the New Japan Party put together － at 41.9%. In fact, it makes you wonder what the Japanese public would do if they could actually vote for None of the Above.

I’m sure you’re not the only one who has also wondered, Does None of the Above happen to go by the name of Junichirō Koizumi? Well, I think that the probability of Mr. Koizumi taking back the Prime Minister’s chair － it’s probably his for the asking, but no one really knows until he does － is only slightly higher than Condoleezza Rice being picked by the Republican Party as its Vice President nominee. That makes it higher than zero, but if you’re holding your breath, I hope for the sake of your health that you’re actually a fish.

Monday, March 17, 2008

If this story had appeared in the Yomiuri, I would have been sure that it was an LDP plant. However, since a Sankei reporter wrote it, with a byline, I think that the LDP should take it seriously. I’m sure that the people there would’ve worked it out already, but just in case they haven’t, this is the message that I would advise them to send out. That is, I would if I were a well-paid LDP advisor. But I’m not an LDP advisor, let alone paid. So I won’t. Instead, I’ll post it here, in English, for your amusement:

“Dear people of Japan, ever welcome residents, and other members of the global community:

“It became clear that the DPJ’s opposition towards the appointment of Toshirō Mutō was driven purely by political motives and had nothing to do with his personal qualifications. In fact, its leaders have admitted as much on public television. We believed then and believe now that Diet members should not play politics with a matter that, handed improperly, could have sent the market into needless turmoil, and during substantial uncertainties in the financial and currency markets at that. Happily, we avoided a crisis by nominating another candidate with similarly excellent credentials and experience.

“We had hoped that the experience would drive home to the DPJ leadership the gravity of the possible consequences of its actions and thenceforth they would refrain from playing politics with other matters of import. Alas, it was not meant to be.

“A news report has brought to your attention the allegation that the legislation that the DPJ had introduced in the Upper House on special tax measures including the gasoline taxes and related matters had been design to trap the LDP-New Kōmeitō coalition into accepting the DPJ plan wholesale or risk massive capital flight in addition to the immediate fiscal difficulties that a prolonged gap in the gasoline tax collection would cause. We had inklings of this, but did not at first believe it. For if true, this meant that the DPJ had never intended to negotiate in good faith in the first place and that they had merely been casting about to find excuses to flout the consent decree by the two House Chairmen that we had accepted and agreed to forego our own stopgap legislation in the event. Thus, we continued to pursue meaningful dialogue and tried not to believe that the DPJ’s time-killing tactics during the deliberations in each of the Two Houses were nothing more than transient moves to position itself in the best situation as the 31 March deadline would approach. We gave every indication that we were willing to discuss and if necessary alter any element of our program in an agreement with the opposition. However, the news report, in conjunction with the fact that its leadership has not made any move to deny its import, has led us to the conclusion that the DPJ has, indeed, decided to endanger the health of the Japanese economy for pure political profit.

“We are both happy, and sad, to report to you, the people of Japan, etc., etc., that the DPJ efforts are in vain, that we will pass our legislative bill, wait for a suitable period, then go ahead with members of the opposition who actually want to seek an optimal solution to the issues surrounding the gasoline tax revenues and our road construction plan. And we will do this with little economic hardship or confusion, unlike the DPJ plan of an immediate cutoff. Let us explain.

“The DPJ apparently believes that a one- or two-month cutoff of the tax relief for offshore depositors will cause massive capital flight. To play such a dangerous game for political gain is almost beyond our imagination, but it’s apparently real. However, 15% of say 0.1% annually － for such are the low interest rates that banks pay on yen deposits － prorated for one or two months is not a substantial amount, in particular compared to the effects of currency rate fluctuations that the market records month by month, week by week, day by day, hour by hour, minute by minute. No wonder that the DPJ ploy has not worked and we have not seen the market jitters in anticipation of a catastrophe that it had hoped for. Moreover, the tax collected at the source will be refunded to the offshore account holders. In other words, there will be no financial loss whatsoever to the offshore account holders who have held steadfast in the face of DPJ’s political blackmail.

“The same holds true for all the other tax measures slated to expire that are favorable to the taxpayer. In other words, all special tax measures beneficial to the taxpayer that are resumed when we pass our tax bills in another month are retroactive as currently drafted. There will be some unwanted paperwork to recover your money. Forgive us, and bear with us, for it is not our intent to inconvenience you.

“On the other hand, the gasoline tax surcharge, when reinstated, will not be retroactive. For any tax benefit that has accrued to the taxpayer will be permanent. Tax agents will not come after you for the money. The corresponding revenue is lost forever to government coffers. This is not evident from the letter of the law as will be amended by our bill. However, a recent court decision made it clear that an amendment cannot be applied retroactively to the disadvantage of the taxpayer. We are of course following this case law here and in all other future tax cases. We have cleared this interpretation with the Cabinet Legislative Bureau and instructed the tax authorities to issue an appropriate public notice. But you saw/heard it here first.

“We are going ahead full steam. But we have every intention of following both the letter and the spirit of the consent decree. We are open to hammering out what now can only be a temporary stopgap solution. Still, we are willing to go ahead, with or without such an agreement, with any member of the opposition, including the DPJ, in its entirety or part, to seek a more permanent solution to our conundrum.

“Finally, we admit that we have been effectively chastised by the revelations with regard to some of the uses to which the hard-earned monies of yours, the Japanese public, etc., etc., have been put. We are also mindful of the allegations of waste and inefficiencies that have accumulated over the decades. We will go forward, with the cooperation of the members of the opposition that have your true interest in mind, to reform the system. We hope that the DPJ in its entirety will join us in this endeavor. However, recent events have filled us with suspicions that this will not be the case. So we feel compelled to make this public appeal.

“To repeat, nobody will lose a yen over this. But we are sorry that we may, if the opposition continues to flout the letter and spirit of the Chairmen’s Decree, inconvenience you somewhat.”

Yes, I just remembered that “if I were…” faux speeches, statements and letters like this are inherently silly. But do I care, me? No. So sue me, me.

Now I could be wrong. But I think that the reasoning, including the legal aspects, is sound. I’m not sure how much effect a statement such as mine will have; the Japanese public is very critical of the road construction expenditures. But the argument in the Sankei report does not appear to hold water.

Yes, I just remembered that “if I were…” faux speeches, statements and letters like this one are inherently silly. But do I care, Me? No. So sue me, Me.

The statements that Rev. Wright made that are the cause of this controversy were not statements I personally heard him preach while I sat in the pews of Trinity or heard him utter in private conversation. When these statements first came to my attention, it was at the beginning of my presidential campaign.

Note how Barack Obama qualifyies his denial. Mr. Obama is taking care to avoid denying that he was aware of Reverend Wright’s what I will call militant views while not explicitly admitting to being aware of them either. Note also that he refers throughout to the reverend’s “statements”.

That’s a narrow, lawyerly way of framing his defense. It makes sense legally, but it invites the inference that he was in fact aware of the reverend’s views and gives an incentive to people in the Clinton camp and (more importantly) Republican operatives to go there to throw mud and dig around. I think that he should have made a full accounting of his understanding of the reverend’s views and how and why he had brought him on board for his campaign, and dealt with the fallout once and for all.

Now the question: Will the media come after him on this? John Podhoretz can be pretty zany sometimes, but I think that he has a point here.

Reading the outcome of any political game is difficult; professionals routinely mess up. This incident doesn’t look at all devastating on its own － John McCain, and Republican candidates in general, have their shares of support from foolish religious figures who purport to lend their Godly caches to views that have no place in public discourse. However, the incident runs counter to the Obama persona. More important, this is the first time that he has sought refuge in legal circumlocutions, or so I remember. If this response is part of a pattern and such incidents recur over the course of the campaign, then Mr. Obama’s candidacy will not stand a chance.

Sunday, March 16, 2008

Yukio Hatoyama appeared on Sōichirō Tawara’s Sunday Project and defended the DPJ against the accusation that it was playing politics with the replacement for the current BOJ Governor, Toshirō Mutō, whose term expires on 19 March. Never mind, though; he endorsed Haruhiko Kuroda and Hiroshi Watanabe, two former MOF Vice Ministers for International Affairs, as the next BOJ Governor. He did not come out and say it outright － it’s not his decision to make － but he responded to Mr. Tawara’s questioning and stated that it was his understanding that the two men were highly regarded, superior to Mr. Mutō in their international backgrounds, and did not come with the kind of MOF baggage that comes with a former Administrative Vice Minister like Mr. Mutō. In fact, the two men were so carried away by the prospects for a compromise that they forgot about Yutaka Yamaguchi, a third possible candidate whose image was prominently displayed in the background together with Mr. Kuroda and Mr. Watanabe’s. One of the regular panelists, an Asahi editorial writer*, pointed that out, but Mr. Hatoyama didn’t bother responding. Go figure.

I still think that it’s going to be Mr. Kuroda. Mr. Watanabe is easier to move, but he lacks seniority. I believe that the foreign press will give either one (or Mr. Yamaguchi, for that matter) a warm welcome, and the domestic press will also show their immediate relief over the resolution of the impasse. The problem with these men, though, is that they lack experience in fiscal policy and more broadly in economic management. Also, their domestic networks are bound to be very different from people from the MOF mainstream. So Mr. Kuroda (or Mr. Watanabe) must give the media a good honeymoon, or they will quickly show their disrespect.

The gasoline taxes took up a lot of Sunday Project time too, but I didn’t hear anything new from Mr. Hatoyama.

Former Mie Governor Masayasu Kitagawa and Kanagawa Governor Shigefumi Matsuzawa, founding figures of Sentaku as well as the Yamazaki faction transplant Nobuteru Ishihara and DPJ Ozawa-hater Yukio Edano, two key members from its political win, appeared on the show to discuss their objectives. They denied that the Sentaku was aimed at seikai saihen, or reorganization of the political parties, but it was clear that Governor Matsuzawa, for one, would love to see that happen. I’ve been working on an argument that something different is likely to happen and the reasons for that (I briefly touched on the subject here, at the end, and in the first footnote here), but I think that it’s going to be too long for a post. If you can help me get it into print, you will receive my undying gratitude.

* Incidentally, it’s my impression that Asahi editorial writers usually come across individually as more moderate than the editorials that they actually write. I assume that it’s the same thing with Yomiuri editorial writers, only in the opposite direction ideology-wise. What do you think?

U.S. Hails Progress in N. Korea Nuke Talks? Not really, though that’s what the CNN headline for the AP report says. True, Chris Hill is quoted as saying, "We certainly are further along in this consultation than we were when I arrived this morning," and "There has been progress." But the AP article says nothing about any progress on the dismantlement of the Yongbyon facilities, while North Korea continued to deny that it had a uranium enrichment program. There’s no mention of North Korea’s plutonium and plutonium explosives stockpiles either.*

The State Department spokesman is unhelpful, as he all but denies any knowledge of the talks with North Korean chief negotiator Kim Gye Gwan and pushes it back to Mr. Hill. Secretary Condoleezza Rice also appears to think little of the event and also refers to Mr. Hill. I hope I’m wrong, but the two sound an awful lot like “Not my baby,” in bureaucratese.

All may not be lost though. It looks like the US push for biofuel is putting pressure on the Kim Jong Il regime. Problem is, half the people in North Korea may have to starve before things change there. Kim Jong Il has basically taken the 22 million North Koreans hostage. It’s the “Buy this book or we’ll shoot this dog” gambit.

Friday, March 14, 2008

The DPJ is not going to back down from its opposition to Toshirō Mutō as BOJ Governor. It knew what the media and big business had wanted, and went and vetoed him anyway (as well as Takatoshi Itō, who lost his only chance for the job of his dreams － the DPJ Upper House majority is likely to last at least until the 2013 election). The LDP may appear to make some attempt at reconciliation after the Lower House vote, but that would be just for show. The search for a replacement will begin, unless there’s been someone else lined up all the while. With that, attention should turn to the gasoline tax revenue/road construction expenditures.

Speaking of which, one name that keeps coming up is Haruhiko Kuroda, President of the Asia Development Bank. Mr. Kuroda, like Mr. Mutō, is also a MOF lifer, but that association could be explained away if the DPJ so desires. He hails from the former financial and international side of MOF, so he cannot be directly identified with the mainstream, public revenues and expenditures side, whose dominance over BOJ was at the heart of the post-bubble BOJ reform in 1997 that, among other things, gave an equal voice to the Lower House on the Governor and Deputy Governor appointments.

Mr. Kuroda also has more than enough international experience to engage in verbal combat with US and European bankers and finance ministers in the G-8. More specifically, as a top internationalist bureaucrat, he can and will recite by heart in both languages every line in the playbook. That is a skill that also makes him one of the most predictable and boring public speakers on the planet, a definite plus for a head of a central bank.

Of course the DPJ could just as easily claim that an administrative background in banking and finance is just as bad, since it came with jurisdiction over the BOJ. But who else is there?

It’s too bad that Toshihiko Fukui, the incumbent, is a non-starter. He is a career BOJ official and once worked the media perfectly, two qualities that Mr. Kuroda could never hope to match. He is also articulate in the two most important languages. Thus, he should have been acceptable to the DPJ. Unfortunately, his is far more complicit than Mr. Mutō to DPJ eyes (or so the DPJ must claim) for the hyper-low-interest policy that robbed deserving widows and retirees of the modest fruits of their hard-earned savings. Add that investment scandal that once threatened to cut his tenure short, and you can see why the DPJ will reject him even as a stopgap measure while the LDP looks for a suitable replacement.

As for Masaaki Shirakawa, the one Deputy Governor who was acceptable to the DPJ, he simply does not look Gubernatorial.

Sorry. It’s difficult to imagine anyone of Mr. Mutō’s stature, network and experience stepping in at the last minute and announcing himself as the second choice candidate, when he doesn’t even know if the DPJ will accept him or not. Unless there’s someone else that we haven’t heard of at all, I think that it’s Mr. Kuroda’s job by default.

With all signs on the BOJ appointments trending to an eventual someone-other-than-Mutō denouement, it’s time to turn my attention back to the gasoline taxes and the road construction budget. (It’s also time to revisit the public pension scandal as the Abe-imposed March deadline for finding the owners of the missing account approaches; but one at a time.)

As I indicated here, I now believe that the DPJ is now gearing up to speed right past the March 31 deadline and let the gasoline tax surcharge lapse. The LDP is surely going to keep sending out feelers to the DPJ leadership while stepping up its lobbying efforts (in cooperation with local government officials and special interests) aimed at the 39 DPJ Diet members (including 25 from the Upper House) who reportedly signed Yasuhiro Ōe’s petition opposing the elimination of the surcharge, and other potential dissenters among the DPJ rank-and-file. The DPJ took a net five-member hit on the BOJ Governor vote in the Upper House (two absented themselves and three abstained, the latter including the rambunctious Mr. Ōe) but none of its members actually voted in favor of Mr. Mutō. However, pressure will be much stronger － from both sides, to be sure － on the gasoline taxes. Further complicating the picture will be the internal dissent on the LDP side.

Assuming that the standoff continues into the new fiscal year, the DPJ has several options. It could stonewall all attempts at reconciliation and keep the gasoline taxes from coming to an Upper House vote past the 60-day limit. It will be hard for the DPJ to maintain credibility with the media if that happens unless new, major scandals involving the road construction money are revealed. Still, the possibility cannot be ruled out, since it just may have to do so to avoid defections. In the event, the LDP-New Kōmeitō coalition will have no choice but to exercise its supermajority in the Lower House to pass the relevant tax bill in its current form, since any amendments made in the Lower House without the consent of the DPJ will have to go back to the Upper House with a new 60-day game clock. The coalition will likely feel compelled to attach a Lower House resolution or something of the sort to the effect that it intends to make the non-partisan reexamination of the issue the top priority item during the next Diet session, if not sooner. Otherwise, the opposition (and the media) will have a field day in excoriating the coalition for enacting a flat ten-year extension. The immediate consequence of this turn of events is a one-month hiatus resulting in a loss of about 200 billion yen or 4% out of the annual gasoline tax revenue. I don't see a major problem fiscally or legally.

A simple Upper House rejection would have more or less the same conclusion, the difference being a few days worth of revenue recovered as the result of an earlier Lower House revote.

The DPJ, with the cooperation of at least parts of the opposition, can also amend the bill in the Upper House and let it pass as amended. In this case, the two Houses must go into a huddle. If the DPJ comes up with an amendment that looks credible to the media (something between the current positions of the two sides) and says, "my way or your way," the coalition will look at the public opinion polls and probably see that it has a very painful decision to make: swallow the amendment whole and let the DPJ take credit for the compromise, or go for the original and take the political hit.

One long-term outcome of all this will be a greater willingness to buck party leadership on individual issues and a corresponding reluctance on the part of the party leaderships to discipline their respective members. The dissent will usually take the form of absence or abstention, though outright defiance cannot be ruled out. All this has happened before. The main difference between then and now is that there is now a credible opposition spanning broadly similar political tendencies as the coalition. This means that both sides are more susceptible to poaching but less so to splintering. Accordingly, the leadership will want to avoid situations that allow dissent to surface, and treat it more leniently when it does.

”There is an urgent need for action to protect kangaroos from a barbaric industry which slaughters them for meat and leather. Please do all you can to help Viva! end this shameful massacre.”－ Sir Paul McCartney, at savethekangaroo.com

Thursday, March 13, 2008

I had dinner last night with several people from New York working closely with the financial industry. You know what? Eliot Spitzer must be the most hated person on Wall Street.

Silliness aside, count on Sudhir Venkatesh to deliver the goods. Is there such a job category as investigative economist? Compared to Mr. Venkatesh, Stepehn Levitt is just a guy who can ask clever questions and do regression analysis.

I wrote in effect that Mr. McCain’s prospects are looking a little better, as the Clintons’ attack on Barack Obama appears to be making some headway. That got me to thinking…

Conventional wisdom has it that the Republicans are nicer to us Japanese. That is, the Republicans see Japan as a valuable ally and, the occasional cookie-tossing aside, treat us accordingly. Indeed, the personal relationships from Ron-Yasu to George-Junichirō definitely have been good. The Democrats, on the other hand, are viewed with more skepticism here, in large part as the legacy of the last Democratic administration, when President Clinton swayed between benign neglect, i.e. Japan Passing, and commercial belligerence, i.e. Super 301, while snuggling up to the Chinese. Most recently, it was not lost on Japanese conservatives that Democrats were the main force behind the House of Representatives resolution on the comfort women.

The Foreign Affairsessays by the presidential candidates if anything served to strengthen this impression among the Japanese elite. Where John McCain said all the right things about Japan and its role as a valuable US ally, the Democratic candidates all but ignored Japan and focused their attention － albeit not completely benign － on China. So, we should be rooting for Mr. McCain, no?

Not quite. Even though the Japanese defense establishment shares US worries over China’s rapid and sustained military buildup behind the bamboo wall, Japanese foreign policy has always been firmly rooted in a pro-China stance since Prime Minister Tanaka normalized bilateral relations in 1972. And it works. Shinzō Abe, the nationalist Prime Minister, enjoyed the one unqualified success of his short, unhappy tenure when he made a surprise trip to China (and South Korea) as soon as the imperial seal dried on his appointment notice. It is also easy to forget in the face of the long chill preceding Mr. Abe’s reign that Prime Minister Junichirō Koizumi’s relationship with Chairman Jiang Zemin had begun on a highly auspicious note, only to flounder on Mr. Koizumi’s repeated visits to the Yasukuni Shrine (which in turn were not intended in any way to provoke the Chinese public and authorities). Even when Tarō Asō, as Foreign Minister in the Abe Cabinet (and Koizumi Cabinet holdover), pushed the now not-gone-but-mostly-forgotten “arc of freedom and prosperity” as well as “value-oriented diplomacy”, he went out of his way to emphasize the central importance and positive aspects of our relationship with China.

Currently, Japanese efforts to investigate the poisoned Chinese dumplings are being rebuffed by Chinese authorities in Beijing and the provinces while the standoff over the China Sea gas fields elude easy resolution, casting shadows on President Hu Jintao’s spring visit to Japan. Yet all this only serves to highlight Prime Minister Fukuda’s pro-China leanings, as the Fukuda administration downplays the differences and the difficulties. After all, China is Japan’s largest trading partner, and Japan is the net exporter. Japan’s cultural penetration into the Sinic nations is becoming at least as substantial as the spread of anime and sushi in the West. We are neighbors for better or worse and, at least for the foreseeable future, the good outweighs the bad.

Given this Japan-China bilateral relationship, it is difficult to see how the Japanese administration can avoid disappointing President McCain’s likely expectations based on his more traditional, value-oriented views on the geopolitics of the Asia-Pacific region. And I haven’t even begun to consider what demands that he will put to Japan in the Middle East, even as the current DPJ leadership and the rest of the opposition gear up to in effect shut the Japanese Self-Defense Force out of Iraq when the authorizing legislation expires in July 2009.

Japan certainly has Mr. McCain’s attention, and perhaps we should be grateful for it. But let's be careful what we wish for, too.

Wednesday, March 12, 2008

"It is regrettable that any of our supporters on both sides, because we've both had that experience, say things that kind of veer off into the personal," she said. "We ought to keep this on the issues. There are differences between us. There are differences between our approaches on health care, on energy, on our experience, on our results that we've produced for people. That's what this campaign should be about."

What’s fascinating is that, looking at the earliest breakdown of the voting in Mississippi, racism and religious prejudice still work their special magic over the US electorate. It’s that, or Republicans are working hard to get Hillary Clinton nominated. Either way, John McCain must be taking heart.

It’s official. According to a notice on the DPJ website, the DPJ leadership met yesterday and unanimously decided to withhold consent for the appointment of Toshirō Mutō as BOJ Governor, as well as Takatoshi Itō as one of the two Deputy Governors. The DPJ is accepting Masaaki Shirakawa, the other candidate for Deputy Governor, since he worked as a career BOJ official. According to the notice, the DPJ is vetoing Mr. Mutō primarily because he 1) is the embodiment of the Ministry of Finance and will not be able to maintain the BOJ’s independence, and 2) shows no remorse for the bubble economy and the hyper-low interest rate policy. If the DPJ has its way, both Houses will vote on the appointments today.

It is a rare event that unites all the mainstream dailies from Asahi to Sankei in urging the DPJ to reconsider. Mainichi even manages to inject some unintended humor into the proceedings as it pleads with the DPJ to abstain from the voting or absent itself altogether as a less harmful way of registering its displeasure*. According to media reports, Ichirō Ozawa was willing to acquiesce but his colleagues refused to go along.

All of which, of course, is no excuse for this blog being dead wrong in its prediction. But what does this portend for the gasoline tax surcharge/road construction budget issue?

If the DPJ is willing to buck the entire mainstream media and the business and financial establishments and even dares to defy this blog to veto Mr. Mutō, then it will surely have no compunctions in rejecting any LDP overtures with regard to its far more populist and publicly appealing stand on the surcharge. The DPJ has backed this stand by a well-justified attack on road construction planning and expenditures that is supported by the national media.

The LDP could, of course, come up with more substantive ideas to bridge the gap. The elements are already in plain view: it could 1) lower the surcharge rate; 2) shorten the duration of the extension, 3) lower the 59 trillion yen estimate for the 10-year government construction plan, 4) shorten the period of the government plan, and 5) put the revenue into the general budget. If the DPJ refuses to negotiate, it could come up with its own compromise package, dare the DPJ to veto it in the Upper House, then exercise the Lower House supermajority override to pass it.

Unfortunately for the LDP, its road tribe and the special interests appear to be too strong for the Fukuda administration to make a move in that direction without the sense that the DPJ is also looking for a compromise. On the other side of the aisle, the DPJ intransigence on the BOJ appointments leads me to believe that there is now a very good chance that the DPJ will rip right through the March 31 deadline under the House Chairmen consent decree. Thus, it looks increasingly likely that there will be little movement on the substance on either side until the new fiscal year dawns and the surcharge lapses, on April 1. I dare not make a stab at guessing what the ultimate outcome will look like, but I doubt that either side will look any better and more worthy of holding the reins of power as the result.

* Yomiuri doesn’t have an editorial on the matter today. But it spoke out last Saturday and should be blasting the DPJ after the actual vote.

Tuesday, March 11, 2008

I have a weakness for this kind of report, where the writer actually looks at the nuts and bolts and the mechanics of the real world in telling the story. So much of what passes for analysis and even straight reporting are preconceptions dressed up in hearsay and anecdotes. Anyway, I’ve been following the US Presidential primaries fairly closely, and this is the first piece that I’ve seen that has bothered to go into the details of the Democratic credentials committee to figure out what is likely to happen. It’s definitely worth a read. I have no way of determining how accurate it is, but it’s an exercise that is missing in every widely available analysis of the Democratic endgame that I’ve seen so far.

Incidentally, I usually follow Real Clear Politics for the numbers, on the upper left of its home page. The most important figures are there, complete with relevant links. Note that it has the popular vote numbers with and without Florida. That’s useful. Significantly, RCP doesn’t include Democratic numbers that include Michigan. RCP must be thinking, not unreasonably, that, while trying to get Florida counted as-is may be slightly tacky, bringing in Michigan would be… cheating.

Which reminds me, I’ve been surprised for some time that the Clintons aren’t pushing for a revote in Michigan and Florida. Well maybe just Michigan, then agree to redo Florida as well, as a concession. Mrs. Clinton needs to win the popular vote; that’s the only way she can swing enough uncommitted superdelegates her way to win the nomination. For that, she’ll need Michigan, which is not going to be counted without a revote, and a concession makes her look sane and reasonable anyway. Besides, only Democrats can vote in a Michigan Democratic primary, so she should have a very good chance there. This is in contrast to Florida, where independents and Republicans can vote as well. Mrs. Clinton should also insist on changing the rules (it can be done; the governor of Puerto Rico recently changed the format there from caucus to a primary in order to favor Mrs. Clinton) to exclude non-Democrats there as well. There’s a certain logic to that; double-voting (between the initial January primary in the Republican primary and the hypothetical second Democratic primary) should be minimized, or so she should claim. I also think that she should look to seal the deal before the delegate numbers harden.

This is in the Asahi, so nobody can be accused of setting up the DPJ. Let me translate for you:

The informal meeting of the directors of the Upper House Budget Committee was held on the 10th, where the ruling parties sought to hold hearings on the FY 2008 budget bill. However, the DPJ was angered because the government with regard to the BOJ appointments introduced its plan to promote Deputy Governor Toshirō Mutō, so it was determined that they would confer further.

The top DPJ director Mitsuru Sakurai explained that it did not consent to hearing under orders from the party leadership. He told the reporters, “Someone that we could not accept was nominated, and was nominated with little time left. (The Diet) is abnormal as a whole and we interpreted our orders to mean that we should not even agree to holding hearings on the budget.” Budget Committee Chairman Yoshitada Kōnoike criticized the DPJ, saying, “It is inexcusable to put the BOJ appointments and hearings on the budget bill on the same level and use them as tools for the political game.”

But, the DPJ is willing to hold hearings on the BOJ appointments, it seems.

I am not sure that Mr. Sakurai realizes how irresponsible this exchange must be making the DPJ look in the eyes of independent voters (while undermining his own personal authority), but I am pretty sure that the “leadership” is a leadership of one, the enigmatic, volatile Ichirō Ozawa. You remember how his long-suffering deputy Yukio Hatoyama has had to harden his position on Mr. Mutō and kept embroidering his reasons for rejecting him as Mr. Ozawa indulges his hopeless obsession for an early snap election.

Even if the increasing DPJ intransigence turns out to be entirely the product of the usual escalation and hardening of positions as a negotiating deadline approaches, I no longer see much room for a DPJ climb-down, and the LDP isn’t helping. The LDP game plan seem to be: be as conciliatory as possible on the gasoline taxes and road construction expenditures, and hold fast on the BOJ appointments. It looks like it’s working so far.

Monday, March 10, 2008

Glenn Greenwald reports. I think Mr. Greenwald is being a little too uncharitable with Carlson Tucker though. It seems to me that it all depends on what the ground rules, stated and unstated, are. There’s a difference between an attempted claw-back in an all-inclusive free-form talk that Samantha Power was giving and a cozy mutual back-scratching relationship that develops between a political operator and a favored journalist. Tim Russert, it seems to me, is as much an opinionated entertainer as a journalist.

Question: An FT reporter told me that in the UK, “off the record” meant that you could write about it but couldn’t identify the source, and that if you didn’t want the reporter to write it at all, you had to say that it was “not for writing”. Is that still true? This was more than 15 years ago…

The 65-year old Shigeo Ōmae is a relative newcomer on the national scene. In 2003, he wrested the Lower House seat from Hyōgo 5th District from then Socialist leader and former House Chairwoman (beating Nancy Pelosi by 14 years) Takako Doi, , and was reelected in the 2005 Koizumi landslide.

Mr. Ōmae is what liberal readers of this blog might call a revisionist-nationalist-conservative. He backs all the right/wrong causes, from a hard-line approach to North Korea to opposing legislation allowing both spouses to keep their pre-marriage surnames. So he probably got his wish in 2006 when the first Abe Cabinet gave him the junior political appointment in the Self-Defense Agency, later the Ministry of Defense.

Sidebar 1: Just to confuse you about the meaning of habatsu and also prove that opposites attract, Mr. Ōmae is a member of the Near Future Policy Study Group, the faction led by Taku Yamazaki, who is the polar opposite of Mr. Ōmae on most flashpoint political issues.

sidebar 2: Until the medieval era, women continued to be identified by their maiden names even after marriage. Moreover, other than for nobles and samurais, what passed for family names appears for much of Japanese history to have been not much more than a form of local identification. In fact, the vast majority of family names (but not the names of the actual population; samurai names like Satō and Suzuki are very common) mirror the geographical names of domiciles from the times when people led far less mobile lives. It is probably safe to say that for the vast majority of Japanese, the first time that they became conscious of their family names was the advent of the Meiji Era.

Mr. Ōmae no longer has the MOD job, but his experience apparently enables him to continue to speak with authority and sympathy for the beleaguered Ministry. For in a meeting with his Hyōgo supporters, he said, “Both sides must have been at fault and there is a need to reveal the causes from a fair point of view.” But, he went on to say more: according to him, the fishing boat “made grave errors, but that is not being mentioned at all”. He also said that the fishermen should have been wearing lifejackets in the first place.

Actually, there have been media reports that the fishing boat may have been partially at fault, and the lack of basic safety precautions on the part of the fishermen has been mentioned in the media as well. But given the lavish attention given to the errors and omissions of the Defense Ministry, he might have felt compelled to speak up on behalf of the defense establishment.

Never mind. An Asahi reporter got wind of his prejudgment of the case, his dissing of the media, and some other harsh words of his toward the two missing fishermen. His statements as well as his apology have been duly recorded.

Mr. Ōmae must be hoping that Sōka Gakkai will be in a sufficiently forgiving mood over his disrespect for the missing New Kōmeitō supporters to help out when the next Lower House election rolls around, God knows when, after the July G-8 Summit and the expiration of the Lower House mandate in September 2009.

Sunday, March 09, 2008

According to the Yomiuri, Kōji Fukuda, the 43 year old head of an organization for social welfare volunteers, decided to declare bankruptcy last month. Mr. Fukuda had incurred 69 million yen in debts when he failed as the New People’s Party Upper House candidate in Gunma Prefecture to unseat the popular guitar-riffing LDP incumbent Ichita Yamamoto in the 2007 July election. One of his creditors is suing the NPP for 4.5 million yen with the novel argument that “the party headquarters assumes the responsibilities of a principal under the Civil Code”.

Running for a Diet seat can saddle you with a hundred million yen or more in debt. Although party headquarters will defray some of the costs, the unfortunate short political career of Mr. Fukuda is an example of how the life of an unsuccessful Diet candidate can go horribly wrong. No wonder the DPJ is having trouble filling all its candidate slots for the next Lower House election.

Money may explain another phenomenon, namely the ease with which the better-endowed LDP has been able to shunt aside Koizumi Kids as the single-seat Lower House candidates in favor of Post Office rebels who have returned to the LDP fold. The LDP isn’t even bothering to give these and other single-seat losers the kind of preferential treatment in the proportional district listing in the 2005 election that enabled them to be elected anyway. I suspect that in the haste to find “assassins” and other candidates to challenge incumbents when Prime Minister Koizumi called the 2005 snap election, Team Koizumi promised and provided exceptional financial support to bring them on board. The downside for the Koizumi Kids is that, without their personal financial commitment, it is easier for the LDP diktat to chuck them in favor of Post Office privatization penitents and other more promising candidates.

More broadly, the need to finance your own political operations imposes a major barrier to new entries. Looked at from another angle, this is the main reason why there are so many legacy Diet members in the LDP and even in the DPJ. Those Diet seats are family businesses, with plenty of sunk capital, political and financial. This is in stark contrast to the Japan Communist Party and New Kōmeitō, whose political candidates rely mostly on institutional support. Public financing for political parties has only somewhat alleviated this situation.

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About Me

After graduation, Jun Okumura promptly entered what is now the Ministry of Economy, Trade and Industry and stayed in in its ecosystem most of his “adult” life. Along the way, he had pleasant stops in an assortment of Japanese quangos (Japangos?), overseas assignments and government agencies. After thirty years, though, it dawned on him that he had no aptitude whatsoever for administration and/or management. Armed with this epiphany, he went to the authorities and arranged an amicable separation; to come out, as it were. He is completely on his own IYKWIAS, but he and the METI folks remain “good friends.” He currently holds the titles of “visiting researcher” at the Meiji Institute for Global Affairs (no, that MIGA) and counselor at a risk analysis firm that dares not speak its name. This gives him plenty of time to blog or make money on his own. His bank account says that he does too much of the first, and insists that he do more of what he calls “intellectual odd jobs”. He wants to be paid to write fulltime, or better, talk—where the easy money is—but that distinction has largely escaped him. He really should not be referring to himself in the third person; he is not that famous.